Liability of a Co-Maker: Distinguished from Guarantor

Maybe you’ve been asked by a friend to sign as a co-maker in a loan. You’re then asked to sign a promissory note or a debt instrument which designates you as a co-maker. There should be no problem with this, as the principal is usually someone we know and trust. I’ve seen, however, co-makers being held liable because the principal debtor was not able to pay. We also have a number of queries related to this issue. So let’s have a brief discussion on the extent of a co-maker’s liability.

A co-maker may be asked to sign on a space provided on the main loan agreement. In other instances, the co-maker is asked to sign a promissory note that looks like this:

I, ____, as the co-maker of the above-quoted loan, have fully understood the contents of this Promissory Note for Short-Term Loan. That as Co-maker, I am fully aware that I shall be jointly and severally or solidarily liable with the above principal maker of this note.

In case of breach of contract or non-payment of the loan, the lender may take any of the following options:

  1. Proceed against the principal debtor
  2. Proceed directly against the co-maker even without trying to collect from the principal debtor.
  3. Proceed simultaneously against both the principal and the co-maker.

Of course, the co-maker may also go against the principal debtor for reimbursement, but this is not an excuse against the lender.

A co-maker is generally treated as a surety. In a contract of suretyship, one lends his credit by joining in the principal debtor’s obligation, so as to render himself directly and primarily responsible with the principal debtor. A surety is bound equally and absolutely with the principal, and is deemed an original promisor and debtor from the beginning. This is because in suretyship there is but one contract, and the surety is bound by the same agreement which binds the principal.

In some instances, the co-maker would argue that he/she is merely a guarantor, not a surety. The two concepts, of course, are different. A surety is an insurer of the debt, whereas a guarantor is an insurer of the solvency of the debtor. A suretyship is an undertaking that the debt shall be paid; a guaranty, an undertaking that the debtor shall pay. Stated differently, a surety promises to pay the principal’s debt if the principal will not pay, while a guarantor agrees that the creditor, after proceeding against the principal, may proceed against the guarantor if the principal is unable to pay.  A surety binds himself to perform if the principal does not, without regard to his ability to do so. A guarantor, on the other hand, does not contract that the principal will pay, but simply that he is able to do so. In other words, a surety undertakes directly for the payment and is so responsible at once if the principal debtor makes default, while a guarantor contracts to pay if, by the use of due diligence, the debt cannot be made out of the principal debtor.

Source: Palmares vs. CA, G.R. No. 126490, 31 March 1998

40 thoughts on “Liability of a Co-Maker: Distinguished from Guarantor

  1. M

    Same situation here. Badly need a legal advise please. 6years pa yun utang ng officemate ko sa lending company, ako yun co-maker nya at wala na akong copy nung contract. Hindi siya nagbayad at umabot ng 100K yun utang nya. Ako yun hinahabol ng lending kasi ako yun pinakamalapit. Ang alam ko nasa province na yun former officemate ko, hindi nagrereply sa messages ko at wala na akong contact details/address. May hearing kami sa fiscal’s office sa june. i dont know what to do. Gusto kong humarap para masabi na singilin muna yun principal bago ako pero baka sabihin lang sakin na hindi na nila mahanap kaya ikaw na dapat magbayad. please help me.

  2. Christine

    Good morning .. I would like to ask your help or opinion about the legality of unregistered lending in our subd. And about the interest rate.
    In our subd. Residents have this so Called “Kapunungan” which a homeowner who wishes to join.. Has to put in P2000…and could borrow with an interest of 10% per month.. Then, they will divide it among themselves as fund before the fiesta.
    My mother who borrowed P15,000. For her friend who did not keep her promise to pay the interest as well as the principal. She let her friend had the money without having her sign. My mother kept this from us over the year.. Until we(her children) were informed that she has to pay P34,000. (15k+ interest of 120%). Less 1 month interest paid by her friend.
    The treasurer deducted her share and made it down to p29k… Then we raised the money and paid her25k..with a bal of 4k..
    Is what they are doing legal? Can we not pay anymore the bal. Because the interest rate made double the principal amount?
    Thank you so much for entertaining my concern….

  3. Gladys

    Good Day:
    Ma’am Sir , I am Gladys Golosino I am in charge with our comakers transfer of loan liability with its maker who are now unallocated , what is the best way or possible solution to tell all of those comakers that they are liable since they sign and read the promissory note. Thank you and God bless.


Leave a Reply

Your email address will not be published. Required fields are marked *